South Africa has found an interesting way to bolster its gross domestic product: include illegal activities.
Stats SA in its latest GDP report expanded its survey to include previously uncovered areas of the economy such as crime, the drugs trade and illegal mining. The “non-observed element” of the economy accounted for 0.2% of GDP in 2008, it said.
See the full story in the WSJ. Via KoryKroft.
6 Responses
Playing with numbers to manipulate your perceived growth rate works on a micro level as well; Goldman Sachs (or was it JPMorgan?) had an infamous “orphan month” in its fourth quarter earnings last year where it switched from a Dec-Feb for 4th quarter to Jan-March for 1st quarter, thus leaving out December entirely for a quarterly rate. December had the worst losses, and all was well. Manipulate GDP seems a logical outgrowth of this kind of thinking
Leigh, Sebastien – bear in mind how difficult it is measure the informal economy in Africa generally. These networks of economic activity are vast but mobile and small scale in their individual ‘outlets’. The practical difficulties must have been mindboggling.
that’s before you get into the true ‘crime’ as opposed to informality. What do you do, wait to get carjacked and then do a survey on how many cars that guy stole that week and what their resale value was?
actually afaik the EU requires member states to account for informal activities within their GDP calculations (which are relevant beyond mere comparisons of size because member dues depend partly on them). But I’m with Leigh – 0.2%???
I think the only country in the world that might be close that that number is the Vatican.
(The standard shadow economy literature hast the lowest countries – usually it’s Switzerland – at around 4-5% http://www.econstor.eu/bitstream/10419/21855/1/dp2004-16.pdf )
Maybe their objective is simply to provide the most accurate possible picture in their official statistics!
Well, it’s not impossible.
But 0.2%? Even in Britain that would be far too low, and in South Africa? Hmm.
Does anyone know why the SA gov’t blatantly manipulates the numbers like this? Who is the target?
I don’t think the target is the SA voters. Those people do not care about GDP numbers; they care about real economic changes in their lives (unemployment, prices etc).
Maybe the target is the aid donors. If the SA gov’t can claim to achieve some growth the donors will be less likely to believe that their aid is wasted. Then the question is: are aid donors that gullible that they will buy the GDP numbers and not see the manipulation?
Maybe the target is international financiers. If SA gov’t can show some growth it will be less likely to suffer from a bank run on vulnerable/unreliable markets. Again the question is: are international financial agents that gullible?
In short, it seems to me that only SA voters are gullible enough to believe the numbers but they don’t care about the numbers. People who care about the numbers will see through this manipulation.
Does anyone know of any research on this?